Austin Real Estate Blog

Offices and other commercial space in Austin are bucking the national trend of falling rents and difficult financing.

A recent Grubb & Ellis Company forecast lists Austin, Texas as the number one city in the nation for commercial real estate investment. Long considered one of the top ten markets in the U.S. for retail, industrial, multi-housing, and office real estate ventures, Austin tops the list for office real estate, beating out cities like Washington, D.C., Los Angeles, Houston, San Diego and Denver. Austin ranked seventh in the nation for retail investment opportunities; Los Angeles held onto the top spot in that category. Austin’s overall strong showing in the commercial market is the result of a number of synergistic factors that have allowed the area to weather recent downturns while remaining relatively unscathed.

Grubb & Ellis credited a strong local economy including government and educational sectors for much of Austin’s strong showing. Federal, state and local government agencies provide over 150,000 jobs in the Austin area, offering a stable employment base that has shielded Austin against the unemployment woes that have plagued other areas in recent years. During 2009, a year when many other major metropolitan areas saw severe job losses and worsening recession, Austin escaped the brunt of the economic downturn with an overall job loss rate of 0.7 percent.

Green technologies are bridging much of the employment gap. Solarbridge and Heliovolt have recently opened offices in the area, and Gemini Solar has begun construction on what will be the largest solar power plant in the country. The plant will be part of AustinEnergy’s overall plan to provide clean electrical energy to the region; located in eastern Travis County, it is expected to generate 30 megawatts of electrical power upon completion in 2010. These new expansions and construction projects will provide additional employment for Austin area residents, and are expected to stimulate growth in the local economy.

Austin’s real estate industry got another boost in a report by Oxford Commercial Inc., which showed that commercial office space leasing stabilized in the fourth quarter of 2009 after three straight quarters of steep declines. Prices for office space have increased in some areas, notably in the downtown area where demand is typically highest. The improvement in leasing figures is believed by most analysts to mark the beginning of an economic rebound in the Austin area. While Austin has experienced fewer difficulties than other areas, it has still felt some of the effects of the nationwide economic woes; this news along with the high ranking by Grubb & Ellis is expected to cement Austin’s position as one of the most desirable commercial markets in the nation.

Leander Commercial Listing by RE/MAX 1

Hamilton Pool Preserve just outside of Austin.

Current economic conditions may have put a damper on vacation plans for the foreseeable future; that trip to Paris or Hawaii may have to wait for another year. Here in Austin, however, we have a number of outstanding vacation opportunities with little or no travel involved. These luxurious retreats can provide all the amenities of a world-class hotel, allowing you to get away from it all while staying close to home. Here are some ideas to help you start planning your next vacation to the sunny climes and picturesque attractions of Austin, Texas.

East Austin’s Lady Bird Lake is the setting for the spacious Architect’s House and the smaller Architect’s Guest House rental properties; these luxurious properties offer lodgings for four at affordable rates, with the use of kayaks included in the nightly rental charge. A deluxe high-definition projection television is available in the Architect’s House for stay-at-home types, and pets are considered on a case-by-case basis.

To truly experience all that Austin has to offer, book a night at the Hotel Irons, which features Austin music, books, and art and serves up some of the best Austin originals including honey and barbecue sauce in its well-stocked pantry. Dogs and kids are welcome in this chic two-story house, and the heated swimming pool makes this a family favorite all year round.

The ultimate fairytale vacation is available at Bouldin Castle with its dungeon, moat, and stone ramparts surrounding a tower. The castle is a new addition to the Austin scene; originally built in 1940 as a Roman Catholic church, it was reimagined in 2007 as a classic European castle. Of course, the moat is really a lap pool, and the vast medieval hall area was once a place of worship, but guests at this elaborate establishment enjoy the illusion created by the medieval décor and atmosphere in this 4,200 square foot Austin castle.

By vacationing in one of the deluxe accommodations available in Austin, residents can enjoy the benefits of well-deserved rest and relaxation while exploring the many attractions that are available in this diverse cosmopolitan city. Take a tour of Austin’s many art galleries, go for thrills and chills on the Austin Ghost Tour, chill out at one of the many live music venues in the “Live Music Capital of the World”, spelunk through the Inner Space Cavern, or book a ride on the antique Austin Steam Train; whatever you choose, you’ll save money and enjoy the best of Austin culture right here at home.

As with any investment, real estate has several categories to evaluate prior to making the best choice for your plans. In some cases the categories are broken down further, thus it is important to evaluate your goals, and your skills alongside the options available to find the best real estate investment fit for your budget.

Real estate investment begins by a simple and obvious division, commercial and residential. With each side there are specific guidelines to justify their function, and value in real estate. Once you are aware of the kind of investment you want to make, you can learn what each sub-category is for the respective options.

If you are considering residential real estate, then the next obvious division comes with single family vs multifamily units. A single family home is independent of all others, and as the name indicates, only one family can reside in it. A multifamily unit indicates that more than one family will reside in portions of the building. Often these are apartments, condos or duplexes.  They do not have yards and the leasing or sales agreements vary only slightly.

In commercial real estate the next category varies a bit more. These properties can range from office buildings in specifically designed clusters or parks to manufacturing sites that require adaptation from lessor to lessor. The difference between these and a residential option is the regulations and taxes associated with each end. With regard to commercial real estate, zoning rules also apply.

Under unique situations there is the option to own both residential property and commercial property. In this case, the mixed use development has unique zoning laws that apply. This will require a clear understanding of the laws and tax regulations associated there with. Talk to your real estate agent or broker for details on the area and where to find the regulations associated with this unique form of real estate investment.

As real estate is often the most stable investment you can make, long term considerations and consulting with the right team is crucial. Finding the right real estate agent such as Joe Cline, will enable your real estate investment venture to be built on a solid foundation.

Once you have established you are the owner of the foreclosure property, have reviewed it with your agent and lawyer you are faced with a significant choice. Should you evict the current tenants or should you continue with the lease they have already? Do you want to initiate a new lease with the current tenants? Those are crucial choices that must be made.

Rental properties purchased through the foreclosure auction process are often one wrought with choices. Typically, a foreclosure purchased rental does not require the current lease be honored, like when it is sold prior to foreclosure. Generally speaking, the new owner has the opportunity to evict the current tenants. This also allows for the new owner to establish a new lease with the current tenants.

Should you chose to accept even one rental payment while still under the previous agreement; you are, in effect, honoring the lease they are in. This means that you, as the new owner, would be bound by those terms until the lease expires and a new one is drawn up. Eviction after such an accepted payment would be difficult if they do not violate the rules of that lease.

By taking some time to understand the rules of the process, you are protecting yourself and the tenant. Should you desire to purchase a property like this, it is prudent to discuss all of your options with a real estate attorney and a real estate agent prior to purchase.

A new law means there are some caveats! Here is a summary from the Legal Aid Society of Cleveland

Upon a Foreclosure Sale of Residential Rental Property,
the Lease or Tenancy Continues with the New Owner

1. Issue. Upon a foreclosure sale of residential rental property, what is the effect of the sale on the tenant’s lease or month-to-month tenancy?

2. New federal law. Protecting Tenants at Foreclosure Act of 2009. S. 896, Pub. L. No. 111-22, §§ 701-704.

3. Effective date. May 21, 2009 (or, more precisely, May 20, 2009, at the time that the
President signed the bill).

4. Application of effective date. The federal law applies to any existing bona fide lease
or tenancy for residing in a property when the property is sold at a foreclosure sale, if
the sale occurs on or after the law’s effective date.

5. Bona fide lease or tenancy. The federal law applies only to bona fide leases and
tenancies, which means:
• The tenant is not the child, spouse, or parent of the mortgagor (former landlord);
• The lease or tenancy was the result of an arms-length transaction; and
• The rent is not substantially less than the fair market rent (or the rent is reduced
or subsidized due to a Federal, State, or local subsidy).

6. Tenants with a bona fide lease. Upon a foreclosure sale, the lease continues with
the new owner as the landlord and, absent cause for termination, it continues until
either (i) the end of the lease term or (ii) the new owner elects to use the property as
a primary residence and provides the tenant with a 90-day notice of termination.

7. Tenants with a bona fide month-to-month tenancy. Upon a foreclosure sale, the
tenancy continues with the new owner as the landlord and, absent cause for
termination, it continues until either (i) the new owner provides the tenant with a
90-day notice of termination or (ii) the tenant provides the owner with a state law
30-day notice of termination.

8. Tenants with a Housing Choice Voucher (aka Section 8) lease. Upon a
a foreclosure sale, the voucher lease (which may be a written month-to-month
tenancy after the first year) is treated the same as other leases (see item 6, above) and
other month-to-month tenancies (see item 7, above). In addition, upon a foreclosure
sale, the housing assistance payments (“HAP”) contract continues, with the new
owner subject to the terms of the HAP contract. The new owner may not terminate
the voucher lease on the “other good cause” business ground that it will assist in the
sale of the property.

If you’ve conducted meticulous investigations on a foreclosure home and effectively placed the winning offer at public auction, it may still take time to be able to move in or start making repairs. There’s a possibility the previous owners of the newly purchased property may yet be living there, making it complicated to take possession. If you’re not equipped for that possibility, you may possibly be in for an arduous as well as messy eviction. Properties arrive on public foreclosure auction platforms at the conclusion of a pre-foreclosure phase, after property owner’s failure to pay the monthly mortgage expenses.

A hectic eviction procedure can be avoided with careful research in addition to effective planning. Though regulations and procedures differ from state to state, these procedures can be of assistance in learning the eviction process and how to avoid a lengthy eviction process.

First – establishing ownership

At the conclusion of the auction, make sure you are given every one of the essential documents from the auctioneer to prove you have made the purchase and are the new owner. At that time speak with the auctioneer and a real estate attorney concerning further steps that have to be taken before taking custody of the property. In several states the auctioned sale is confirmed by the court within a specified period of time, potentially up to 3 months. Verify as soon as the auction is completed.

For some locations and states there is a redemption period. This is designed to allow the original owners to purchase the property from you for the price paid at auction, plus applicable fees. In some states this period is as brief as one month or as long as one year. Review your state here: Applicable State Laws to identify if and how your state fits into this. This is often a reason given by the previous owners for not vacating the property..

Understanding the eviction process

Every state, and at times every county has a different eviction law and process. It is vital that before you enter the auction, you contact a local real estate attorney or the county sheriff. They are best equipped to prepare you for the eviction process in the location you are reviewing for purchase. By doing this you will be protecting everyone involved with the sale and purchase of the home, every step of the way.

The court process often takes months, so knowing your rights and the rights of the previous owner are vital. Contacting the court system for the eviction process should occur at the soonest possible moment, to assure everything is handled correctly and fairly. As the case comes to an end, the judge will give you are writ of possession and order the local sheriff to evict the occupant. AT this time the sheriff will serve the notice and remove the occupant 24 hours later.

Obviously this is general, so verify locally to make sure you are aware exactly what the process is.

Many small businesses find that sharing a facility with other companies, while receiving the same benefits available to many large corporations, to be an economical and reasonable solution for their business needs. Which benefits are used here? The option to share copy costs, energy pricing and in some cases, phone or secretarial services as well. This offers the cost cutting over head choices and still allows for the prestige of having an office for your business.

Business Office Centers can be used by start-ups and small businesses, or organizations. Historically speaking, when a larger corporation has used them, it has been as a remote office for sales teams or investment holding. Now they are the alternative to their real estate holdings. This means that this design of office building is becoming more in need. For Austinites this equals the most efficient use of green resources for large corporations. There is no need for new building construction or major upgrades. There is also the opportunity for the Virtual Office bundle, which often includes a bill for the office and covers all the major services required to present the major corporation image.

The Office Centers are both cost effective and green, making them an ideal commercial location for many businesses. It enables a company to know they are creating the basis for a successful growth while helping the environment, and bettering Austin along the way.

A rental property can be a great investment and has the potential for a solid return. Real estate should never be purchased frivolously and research should be done before going forward. You must make sure that you are financially able to deal with any surprises, whether human-related, or basic property maintenance. There is an obvious possibility of a decent income from a rental property, and this can attract many people. It is important to look at all factors that come with being a landlord.

First of all, it will be your home. If the person you are renting to does not treat the house well, or if they suddenly lose their job, are you the type of person who can evict them. In regard to your finances, it does not matter if it is a single post-college tenant, or a family of five. You still need to pay off the loan. Look at other houses in the area that interests you to decide what amount of loan you need and how much rent can be charged. The rent needs to pay the mortgage, plus whatever reasonable amount you want to come back to you. Normal maintenance will be necessary, but remember surprises do come up even in the best of circumstances. It is not a good situation if you would need another loan just for a maintenance issue, so do the math and be sure you can cover the what ifs. If you are able to successfully manage all of these factors, rental property investing could be a great way to financial stability.

Austin Investors Interests LLC, a local group that monitors the market in Austin, has projected a slowdown in apartment rentals within the first two quarters of next year. There are more than 12,000 apartments expected to be built during that time. During this last quarter, more than 2,500 were added to the market. These complexes will be in and around downtown, making them convenient to work and shopping. Occupancy has declined, and with so many new options coming up, the study projects it will continue.

The previous quarter shows an occupancy drop of 94.1% to 91.4% from the same quarter last year. Since the quarter includes the months of August and September when many college students are returning to the area, the drop has caused some concern. Many property managers are adding incentives to rentals in the area, including free rent and possibly discounts. Some are offering extended leasing options to reduce the rate of move outs during the year. The average rental is currently $821 a month. With the housing market as it is, many homeowners are choosing to rent their home as opposed to selling, which has also helped add to the slowdown for apartments. Some feel that metro Austin is setting itself up for an immediate downturn in occupancy rate and predict an overall decrease in rent of 3-5%. The job market here has remained steady, but still slow, which will also affect the rates. The next twelve months will be tight in Austin as the city works to fill all the new apartments.

One Austin are company believes that there is a great stake to be had with campus local properties.

Student housing on college campuses may become the real estate deal of the year. American Campus Communities, Inc has been developing student dorms and campus apartments since 1996. The company went public in 2004, and the website states it has developed over $1 billion in this specific housing. The company, based in Austin, has built housing at Arizona State University and near Texas A&M, among others. The company is well known for their quality work and building owners can usually expect to increase rent prices once updates are complete.

The most recent transaction of American Campus Communities, Inc is the acquisition of GMH Communities Trust student housing division. This $1.4 billion buyout was completed in June and has hindered some of the buying company’s revenue. American Campus Communities reports quarter increases of 30%. Occupancy has increased and rent has also gone up over the last few quarters. Though the GMH portfolio was a bit weaker than ACC, the company expects that this new deal will serve to continue the steady increases across the board. “While we inherited the GMH portfolio with leasing status approximately 5 percent behind last year’s pace, we believe that given our track record for integration and execution, we can dramatically impact value with the commencement of leasing activities for the 2009-2010 academic year beginning Q4 of this year,” American Campus CEO Bill Bayless says.

With the addition of the GMH portfolio, American Campus Communities now has 88 student housing properties with more than 54,000 beds nationwide. The company will continue to improve on existing properties and increase revenue throughout the next quarter as well.

With the recent purchase of the nine apartment buildings from Equity Residential, Northland Investment Corporation became the top owner of multifamily housing in the Austin area. According to this article in the Statesman, Northland bought the complex from Equity Residential for $270 million and, with this sale, Equity leaves the Austin market for what they perceive to be greener pastures on the east and west coasts.

The nine apartment complexes comprise a total of 2,985 units and are scattered about the northern and southwestern areas of the Austin region. Included are Madison at Stone Creek, Madison at Wells Branch, Madison at the Arboretum, Village Oaks, Arboretum at Stonelake, Madison at Walnut Creek, Madison at Scofield Farms, Sedona Springs, and River Stone Ranch. Northland Investment, which is based in Massachusetts, was attracted to the Austin market by encouraging job and population growth rates, and the growing high tech industry in the area.

Equity cites their strategy of a focus on long term ownership and higher growth in markets where the supply of housing is limited and feel the coasts offer this opportunity. It has been the contention among many experts that the Austin area has already become overbuilt with multifamily housing and that this will drive down rents and occupancy rates.

Local market analysts have pined the apartment occupancy rate to 93.4 percent in June 2008. This rate is down only slightly from the same time the previous year. During this period rental rates have continued to rise, albeit slowly. Real Estate experts predict occupancy rates will continue to fall steadily through the end of 2008, however with new construction slowing, most believe the decline will stop over the next year. This is anticipated to put the multifamily housing market into a positive bracket again.